CLSA in the San Francisco Business Times: The Puzzle of Drug Prices

By Ron Leuty | July 7, 2017

Despite a failed November ballot proposal, the drug pricing issue is not going away — certainly not from legislative chambers. Lawmakers are mulling three bills that touch on various issues of drug pricing. One of the problems, says Brett Johnson, senior director of policy at the trade group the California Life Sciences Association, is that each flips over a piece of the drug-pricing puzzle without taking into account the other pieces. Here’s a synopsis of the three primary bills:

Assembly Bill 315

The bill from Assemblymembers Jim Wood and Brian Dahle would require prescription benefit managers — who manage drug programs for self-insured employer plans, commercial health plans and others — to be registered and licensed. That’s a good thing, Johnson says, since PBMs have so much sway over discounts, rebates and whether a drug actually can be used by certain insurance plans. But the data that would be gathered from the PBMs won’t be public, Johnson says, so it does little to help employers and consumers determine the true cost of a drug.

Senate Bill 17

Sen. Ed Hernandez’s version of an Assembly bill sponsored by David Chiu is aimed at bringing transparency to drug pricing by requiring manufacturers with drug list price increases of 10 percent or more over a two-year period to report those increases. The problem, CLSA’s Johnson says, is that the list price doesn’t take into account rebates and discounts to insurers and prescription benefit managers, or PBMs, coupled with the traditional health care inflation rate of 5.4 percent. That gives the public a warped perception of price, certainly not the real cost of a drug, Johnson says.

Senate Bill 790

A broad-reaching bill sponsored by Sen. Mike McGuire, it would corral a host of drug-industry spending on doctors. Some see that cash as honoraria; others see it as a payoff to prescribe companies’ drugs. The bill would ban all gifts and benefits from drug companies to docs, except in noted cases. “The way it’s structured is a recipe for unintended consequences,” Johnson said, that won’t be quickly fixed because the bill could go quickly to the legislative floor and to the governor’s desk. CLSA members, Johnson says, are still raising questions about whether this or that is allowed. “We’re not sure,” he says.